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Bankruptcy laws are federal laws designed to give those who cannot repay their debts a fresh star" in their financial affairs by either eliminating debts or allowing for a structured repayment of those debts. The Federal Bankruptcy Code is organized into several different Chapters. Although there are many Chapters in the Code, the most commonly utilized ones for individuals and small businesses are Chapter 7 and  Chapter 13.

Chapter 7

Chapter 7 is a liquidation bankruptcy that  is designed to eliminate (i.e.,  discharge)  many kinds of debts for those who lack the ability to repay them. In most cases, the debtor may retain necessary assets such as his or her home, vehicle, personal effects, and retirement funds while eliminating other debts.

Chapter 7 can discharge most unsecured debts, including credit card debts, signature loans, medical debts, etc. However, certain debts cannot be discharged in Chapter 7. Debts that are not dischargeable in Chapter 7 include, but are not limited to:

·      Federally guaranteed student loans

·         Child and/or spousal support debts

·         Certain federal and/or state tax debts

·         Debts incurred to pay taxes that are themselves not dischargeable

·         Debts for money, property or services obtained by means of fraud, false representation or wrongful conduct including embezzlement or larceny

·         Debts stemming from intentional or malicious injury to person or property or from driving while intoxicated

·         Criminal and/or civil fines or penalties owed to governmental entities

        Certain debts incurred shortly before filing bankruptcy

One practical limitation on the ability to file Chapter 7 is your income level. Simply stated, the courts try to reserve Chapter 7 for those whose income level is simply insufficient to allow them to repay any meaningful portion of their debts. Thus, your household income level has a great deal to do with your eligibility for Chapter 7.


                                                                    Chapter 13

Chapter 13 permits a reorganization of your debt, which allows debtors to repay some or all debts under a court supervised repayment plan. As in Chapter 7, creditors are not permitted to engage in collection activities after the case is filed without obtaining court permission.

Chapter 13 can be used to:

·         prevent foreclosures

·         prevent auto repossessions

·         repay delinquent auto, mortgage and other secured debts

·         halt IRS garnishments or levies

·         repay child support arrearages

·         protect property that would have to be surrendered in Chapter 7

·         obtain a bankruptcy discharge for those persons not eligible to file Chapter 7

A Chapter 13 repayment plan can be set up to allow you to repay debts by making a monthly payment over a period of time as long as five years and can allow you to retain property that would otherwise be lost to foreclosure, repossession, or garnishment. 

                                                           Creditors' Rights

NRW LAW Office also offers bankruptcy-related services for creditors, such as:

  • Attending 341 creditors' meetings

  • Motions for relief from stay 

  • Proofs of claim

  • Reaffirmation agreements

  • Objections to Chapter 13 plan confirmation      



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